Four Bay Area community banks have won fresh pools of money under the U.S. Treasury’s new Small Business Lending Fund, but opinions are divided on whether the fund will do much to spur business lending.

“We think there are a lot of small businesses out there needing financing,” said Tom McGraw, CEO of First National Bank.

Competition for SBLF funds was intense, with only about 300 of the nation’s 7,000 banks getting funds. Congress authorized the Small Business Lending Fund as part of the Small Business Jobs Act of 2010.

However, critics say that most of the money will go not to new lending but to refinancing banks’ outstanding obligations to the U.S. Treasury under the Troubled Asset Relief Program, allowing them to exit TARP. The rules do not allow a bank to have money under both programs.

First National received $12 million in SBLF money and paid off $12.6 million in TARP funds, dipping into its cash drawer for the $600,000 difference.

Pacific Coast Bankers’ Bank received almost $12 million in SBLF money, replacing a similar size TARP investment. The bank said it will work with its 1,000 community bank clients to boost small business lending nationally.

Other Bay Area recipients included the Low Income Investment Fund in San Francisco, $7 million; OBDC Small Business Finance in Oakland, $219,000; and the Opportunity Fund Northern California in San Jose, $2.2 million.

California Bank of Commerce got $11 million in SBLF funds and repaid $4.2 million in TARP money. The bank said its SBLF funds will support about $65 million in small business lending.

“It’s a significant amount of money. That’s almost two years of growth for us,” said John Rossell, president and CEO of the $254 million bank.

That could mean more money flowing into the hands of Bay Area business owners. California Bank of Commerce this month expanded into asset-based lending, essentially lending against a borrower’s accounts receivables. The move involved hiring former Heritage Bank of Commerce banker Jim Christiansen and opening a San Jose business-credit office.

The expansion into asset-based lending allows California Bank of Commerce to lend to small and mid-sized companies whose financial strength, high growth rate or customer concentration make it ineligible for traditional business lending.

Novato-based Circle Bank was among those that sought to participate in the program but later withdrew its application.

Circle Bank’s CEO Kimberly Kaselionis praised the concept of getting billions of dollars into the hands of small business owners. But she criticizes how the program was implemented, noting that so much of the money refinanced TARP investments. She also points out that just $4 billion of the SBLF’s $30 billion was awarded as of this week.

“I have a hard time reconciling what was the true purpose of the program,” she said. “The numbers don’t support the vision.”

First National Bank expects it will take a lot of work to find qualified business borrowers. The bank is going after Bay Area companies with $3 million to $15 million in annual revenue. But First National doesn’t plan to relax its conservative lending practices.

“There’s a reason we’ve been around 48 years,” McGraw said. The bank’s requirements include three years of tax returns, CPA-audited financial statements and no higher than 65 percent loan-to-value on commercial mortgages.

“If we don’t see a noticeable increase in small business lending in a year’s time, we’ll revisit the issue and possibly pay back the money,” McGraw said.

But for now, McGraw is confident creditworthy borrowers are out there. The bank recently boosted its Bay Area presence by opening a second branch in San Francisco and establishing a Sunnyvale loan office that is expected to become a full-service branch next year.

“It’s more than just opening our doors and they will come,” he said. “We have to go out and find them.”

Mark covers banking and finance.

Industries:

Comments

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.